Social cost of climate change too low, scientists say

January 12, 2015

Economic growth for nations has historically fluctuated over time. A new Stanford study suggests the long-term impacts of climate change could perturb GDP growth rates even further. Credit: Delavane Diaz

The economic damage caused by a ton of CO2 emissions-often referred to as the "social cost of carbon-could actually be six times higher than the value that the United States uses to guide current energy regulations, and possibly future mitigation policies, Stanford scientists say.

A recent U.S. government study concluded, based on the results of three widely used economic impact models, that an additional ton of CO2 emitted in 2015 would cause US$37 worth of economic damages. These damages are expected to take various forms, including decreased agricultural yields and harm to human health related to climate change.

But according to a new study, published online this week in the journal Nature Climate Change, the actual cost could be much higher. "We estimate that the social cost of carbon is not $37, as previously estimated, but $220," said study coauthor Frances Moore, a PhD candidate in the Emmett Interdisciplinary Program in Environment and Resources in Stanford's School of Earth Sciences.

Based on the findings, countries may want to increase their efforts to curb greenhouse gas emissions, said study coauthor Delavane Diaz, a PhD candidate in the Department of Management Science and Engineering. "If the social cost of carbon is higher, many more mitigation measures will pass a cost-benefit analysis," Diaz said. "Because carbon emissions are so harmful to society, even costly means of reducing emissions would be worthwhile."

For their study, Moore and Diaz modified a well-known model for calculating the economic impacts of climate change, known as an integrated assessment model, or IAM. Their alternative formulation incorporated recent empirical findings suggesting that climate change could substantially slow economic growth rates, particularly in poor countries.

IAMs are important policy tools. Because they include both the costs and benefits of reducing emissions, they can inform governments about the optimal level of investment in emission reduction. The U.S. Environmental Protection Agency, for example, uses the $37 average value from three IAMs to evaluate greenhouse gas regulations. Canada, Mexico, the United Kingdom, France, Germany and Norway have also used IAMs to analyze climate and energy policy proposals.

Coal fired power plant on the Ohio River just West of Cincinnati. Credit: Robert S. Donovan

While useful, IAMs have to make numerous simplifying assumptions. One limitation, for example, is that they fail to account for how the damages associated with climate change might persist through time. "For 20 years now, the models have assumed that climate change can't affect the basic growth-rate of the economy," Moore said. "But a number of new studies suggest this may not be true. If climate change affects not only a country's economic output, but also its growth, then that has a permanent effect that accumulates over time, leading to a much higher social cost of carbon."

In the new study, Moore and Diaz took a widely used IAM, called the Dynamic Integrated Climate-Economy (DICE) model, and modified it in three ways: they allowed climate change to affect the growth rate of the economy; they accounted for adaptation to climate change; and they divided the model into two regions to represent high- and low-income countries.

"There have been many studies that suggest rich and poor countries will fare very differently when dealing with future climate change effects, and we wanted to explore that," Diaz said.

One major finding of the new study is that the damages associated with reductions in economic growth rates justify very rapid and very early mitigation that is sufficient to limit the rise of global temperature to two degrees Celsius above pre-industrial levels. This is the target that some experts say is necessary to avert the worst effects of global warming.

"This effect is not included in the standard IAMs," Moore said, "so until now it's been very difficult to justify aggressive and potentially expensive mitigation measures because the damages just aren't large enough."

The pair's IAM also shows that developing countries may suffer the most from climate change effects. "If poor countries become less vulnerable to climate change as they become richer, then delaying some emissions reductions until they are more fully developed may in fact be the best policy," Diaz said. "Our model shows that this is a major uncertainty in mitigation policy, and one not explored much in previous work."

The pair notes two important caveats to their work, however. First, the DICE model's representation of mitigation is limited. It doesn't take into account, for example, the fact that low-carbon technologies take time to develop and deploy.

Secondly, while it explores the effects of temperature on economic growth, the model does not factor in the potential for mitigation efforts to also impact growth.

"For these two reasons, the rapid, near-term mitigation level found in our study may not necessarily be economically optimal", Diaz said. "But this does not change the overall result that if temperature affects economic growth-rates, society could face much larger climate damages than previously thought, and this would justify more stringent mitigation policy."

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These damages are expected to take various forms, including decreased agricultural yields and harm to human health

B.S.. Agricultural yields have been on the increase for decades (most especially during the heart of the supposed global warming period which ended about 18 years ago) and over all human health has generally likely increased.

Why is it AGWites have to resort to fallacies to support their claims (rhetorical)? I'll tell you why. That's because the only way to support a lie, is with more lies!

Like many article on this subject, the subliminal is that CO2 does cause warming. Having made this assumption without stating that this it is an assumption, the article goes on to predict the damage.

SO, by your logic, if an article is discussing volcanic activity and they don't state that plate tectonics is a given, then they are making an assumption? No wonder you can't understand climate science!!

They don't state it because it is clear, obvious, and accepted by the vast majority of scientists who deal in the subject.

There is man made components in global warming, but bottom line is there is ALWAYS warming after glacial maximum. There's long term sun cycle, 11 year cycle, CO2, and comet. So expect dry/drought in summer and longer harsher winter and extreme weather. Extreme weather is not going change too much unless CO2 level are drastically reduced, which cannot happen without nuclear fusion power plants or population reduction. What really needed is birth control but religion is against it since it reduced money from potential follower.Other than that, there's more earthquake and volcano activity due to ice melting and increase hydro pressure due to water rising in equator. Higher volcanic activity traditionally block the sun and cool the planet, but co2 might keep temperature higher than normal.Due to reduced sunspot, there can already be low sun

why not try and do a cost benefit analysis on the costs of continuous warfare. or of continuous money printing (we are now in 18 trillion of debt) .

oh there are unanticipated costs to these things, just read history. point being, it is flat out stupid to do cost benefit analysis on those things because that's not how the world works.

when it comes to the environment, cost benefit analysis is equally as stupid. either something is too dangerous and needs to be stopped, or it isn't. only a industry cartel or a bank wants cba to be done for the sake of putting a price tag on something they call an 'unanticipated cost' for the purpose of selling you a solution to 'save' you money.

mostly the impressionable and cultmembers cannot see through this bullshit. it takes well educated people some time to learn about the deceptive quality of these arguments. they are , ultimately, transparent.

Of course the social cost is too low. Because we don't pay the real cost of our environment actions. We aren't paying the true environmental costs for much of the major damage we are doing to it. Every time we throw something in the garbage (and every one of us produces tons of every kind of waste, directly and indirectly) we don't pay the true cost to the environment. The costs are hidden in landfills, the ocean and the atmosphere.

The title should read "Costing" not "cost". The overall combined cost is high but not all obvious until careful/full scrutiny and accounting applied. Any "costing" will be low until proper accounting of all the various cost-components are included....which will then show the "cost" is actually high despite our current low "costing" of same due to omission of many non-obvious costs. Good luck to us all. :)

This study does not take into account the many benefits of CO2. Since we are at the end of the interglacial period, we need more CO2, not less to stave off a new "little ice age". Or maybe the real thing. Here is a "Limerick.What then is this "Carbon Pollution"?

A sinister, evil collusion?

CO2, it is clean,

Makes for growth, makes it green,

A transfer of wealth, a solution.With the explanation: lenbilen.com/2014/02/22/co2-the-life-giving-gas-not-carbon-pollution-a-limerick-and-explanation/